An HSA offers tax-free compounding
Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by U.S. News & World Report in an article — by reporter Tony Dong, “6 Funds to Add to Your HSA” — regarding investment selection for your health savings account (HSA).
Your Health Savings Account (HSA)
A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an HSA are not subject to federal income tax at the time of deposit. Funds may be used to pay for qualified medical expenses at any time without federal tax liability: qualified medical expenses, include but are not limited to copays, prescriptions, dental care, contacts, eyeglasses, bandages, X-rays, crutches, and over-the-counter medicine for you and your spouse and all dependents you claim on your tax return.
HSA vs. FSA
A huge plus to an HSA is that, unlike a Flexible Spending Account (FSA), any unused HSA funds may be rolled over to the next year. There are several additional benefits to using an HSA. First, HSA contributions are tax-deductible, which can lower your taxable income. Second, HSA funds grow tax-free. Third, HSA funds can be used to pay for qualified medical expenses at any time, without federal tax liability. Fourth, HSA funds can be invested, which can allow them to grow even more over time. Fifth, HSAs are portable, which means you can keep your HSA even if you change jobs or health insurance plans. If you are eligible for an HSA, it can be a great way to save for your future medical expenses. Because you own the funds in your HSA, you can decide when and how to use them, which can help you make more informed decisions about your health care.
Because you own the funds in your HSA, you can decide when and how to use them, which can help you make more informed decisions about your health care.
For 2023, HSA contribution limits are $3,850 for self-only coverage and $7,750 for family coverage. Those 55 years old and over can take advantage of an additional $1,000 annual catch-up contribution.
HSAs, questions to ask
Focus on your risk tolerance when choosing your HSA investments as well as the expected timing of your healthcare expenses. Are you comfortable with taking on more valuation volatility to potentially earn higher returns, or do you prefer to be more conservative with your investments? Do you have an expensive surgery or medical procedure planned? If so, you may want the appropriate funds set aside in something low risk. Understanding the answers to these questions and/or consulting with Running Point can help you determine the appropriate asset allocation for your HSA in terms of your medical needs as well as relative to your entire investment portfolio.
Quoted article excerpt is below:
“Consider focusing on your risk tolerance as well as the expected timing of future health care expenses when choosing your HSA investments,” says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors. “Are you comfortable with taking on higher volatility, or do you prefer to be more conservative? Do you have an expensive medical procedure planned?”
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23-41